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8 Our hypothesis was that management practices were key drivers of hospital performance Codify good management practices Select and train a team of interviewers Correlate management and performance Assess quality of management practices Select and target hospitals Randomly selected public and private hospitals across 7 countries Focused on assessments at the specialty level

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16 Good management is correlated with better clinical and financial performance 7% reduction in risk adjusted 30 days AMI mortality rates 1 14% increase in EBITDA per bed 0.8 increase in the percentage of people that would recommend the hospital A one point increase in management practice is associated with: UK Hospitals US Hospitals 6.5% reduction in risk adjusted 30 days AMI mortality rates 33% increase in income per bed 20% increase in the probability that the hospital is above average in terms of patients satisfaction

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17 There is a wide variation in average hospital management practice score by country France Italy Canada Germany Sweden UK US Average with controls Average Management practice score – by country

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21 Hospitals with more clinicians as managers have better management Proportion of managers with a clinical degree Top quartile rd quartile2 nd quartileBottom quartile Management score relative to national mean

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23 There is wide variation in the prevalence of clinically trained managers by country US Canada Sweden Germany France UK 1Italy excluded as it is a legal requirement that all general managers have clinical degrees Percentage of managers with a clinical degree 1

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24 Tougher competition appears to be good for management 1 to None 2.59 Number of competitors 1 More than to As perceived by the manager. Management practice score

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25 There is a strong relationship between hospital size and management practice Number of employees 1 >1, , < Directly employed by the hospital Management practice score

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31 These findings pose some questions for UK policy makers How can greater competition be fostered ? How can the trend to more clinically qualified managers be accelerated to close the gap with other countries ? Which conditions need to be in place to give managers increased autonomy ? What role could diversity of provision play in raising the bar ? How could greater talent management flexibility be realistically introduced into the system ?

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32 There are also questions for other stakeholders How do commissioners ensure access to top performing hospitals? What implications, if any, are there for GP Commissioners? Commissioners How can viable investment opportunities be unlocked? What would make UK healthcare a more attractive investment? Investors What are you going to need/demand to ensure you are best informed and able to execute choice? Patients What role can AHSCs play in developing more clinically trained and excellent managers? Are AHSCs fully capturing the potential export opportunity? Academic Health Science Centres

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Management Matters in Healthcare

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34 OUT

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35 Individual performance-based pay increase2.9 Further control over budget and investment decisions (for the whole service line) 3.0 Ability for service line to access part of a surplus pool of funds proportional to achievement of agreed objectives 3.3 Autonomy is a strong incentive for managers 1 Based on 2007 McKinsey survey of 39 clinical directors and general managers across four National Health Service (NHS) foundation trusts The most attractive incentives Incentives for potential service-line leaders, average of responses, on a scale of 1–4, where 1 = not motivating and 4 = extremely motivating Increased opportunities for development (e.g., taking on more responsibilities or new projects 3.1 Further autonomy in decision making (for whole service line) 3.5 Operational performance-based awards, akin to clinical-excellence awards 2.8 Managers Top 3 non- financial incentives 1 For voice over only - Differences are too small to be useful

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36 Background Healthcare spending has risen as a share of national income in all countries over the past decades Changing demographics, technology and wealth will continue to impact how countries deal with healthcare UKs recent Comprehensive Spending Review has implications: – NHS spending to rise by 0.1% pa in real terms through 2014/15. – This is slowest in a generation Pressing need to increase health sector productivity

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37 Why care about management and healthcare quality and productivity? Large differences in productivity and quality across hospitals Despite the importance of quality and productivity our understanding of what causes differences across hospitals healthcare was poor Our approach: What is the role of management practices?

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38 The management matters programme Over the last decade McKinsey and the CEP – with Stanford and Harvard - have measured and sought to explain the role of management practice in driving performance Initial focus on private sector, e.g. Manufacturing work covers over 6,000 firms in 19 countries which found – Large variation across countries and firms – Management is strongly linked with better firm performance New focus on the public sector – 2006 surveyed 104 NHS acute trusts & 22 private hospitals – 2009 surveyed 1,194 hospitals in 7 countries (Canada, France, Germany, Italy and Sweden, UK and US) For voice over only